Saturday, January 26, 2008

"The record industry is careering towards meltdown. A good thing too, says Simon Napier-Bell, after 40 years of working with its most notorious moguls

The lobby of the Sony building in New York is 70-feet high and heavy with music business ambience - gold records, photographs and the 'Sony Shop of New Technology'. Upstairs, the main reception is like the lounge of an exclusive club. Young people, dreaming of stardom, stand in wonder breathing in the atmosphere, looking at memorabilia - platinum CDs, photos of stars, framed press reports, Billboard charts. For an aspiring artist or manager, just to step into the building is a thrill. The impression is of a corporation dedicated to the success of its artists, almost altruistic in its understanding of their needs.

The life and crimes of the music biz

The record industry is careering towards meltdown. A good thing too, says Simon Napier-Bell, after 40 years of working with its most notorious moguls

Sunday January 20, 2008Observer Music Monthly

The lobby of the Sony building in New York is 70-feet high and heavy with music business ambience - gold records, photographs and the 'Sony Shop of New Technology'. Upstairs, the main reception is like the lounge of an exclusive club. Young people, dreaming of stardom, stand in wonder breathing in the atmosphere, looking at memorabilia - platinum CDs, photos of stars, framed press reports, Billboard charts. For an aspiring artist or manager, just to step into the building is a thrill. The impression is of a corporation dedicated to the success of its artists, almost altruistic in its understanding of their needs.

Article continuesYet it's nothing but a flytrap. Artists go there dreaming of being signed. But out of every 10 signed nine will fail. A contract with a major record company was always a 90 per cent guarantee of failure. In the boardroom the talk was never of music, only of units sold. Artists were never the product; the product was discs - 10 cents' worth of vinyl selling for $10 - 10,000 per cent profit - the highest mark-up in all of retail marketing. Artists were simply an ingredient, without even the basic rights of employees.

Imagine the outcry if people working in a factory were told that the cost of the products they were making would be deducted from their wages, which anyway would only be paid if the company managed to sell the products. Or that they would have to work for the company for a minimum of 10 years and, at the company's discretion, could be transferred to any other company at any time."

In this article we have argued that it is possible to construct a viable new system to finance innovation in a way that maximizes access to new inventions while continuing to exploit commercial competitive market incentive mechanisms.

The prize mechanisms should be thought of as part of a larger ecosystem of financing medical R&D and should be implemented in combination with other instruments, such as direct or indirect government funding of basic research, non-profit product development partnerships (PDPs), clinical trials, and other traditional and non-traditional types of funding R&D. What the prizes offer uniquely is an alternative to the marketing monopoly as an incentive for private investment.

When implemented properly, prize based models can directly reward successful R&D projects, while permitting marginal cost pricing of products and avoiding the trap of overly bureaucratic and centralized decision-making. By decoupling the rewards for successful R&D investment from the sales of products, the new model will permit governments to create more efficient and useful incentives for R&D that focus on inventions that improve health outcomes.

Prize mechanisms can be implemented in ways that are consistent with a robust patent system, but are best implemented in systems where the patent system is used to establish ownership of inventions and thus claims on the prize rewards, rather than through exclusive rights to market products. It is important that those incentives are linked to broad research priorities, and not be overly prescriptive in terms of diseases, mechanisms or technologies. By eliminating marketing monopolies on products, there is an opportunity for much greater efficiency through unrestricted competition to manufacture the resulting medical products.

The elimination of marketing monopolies, the de-coupling of R&D incentives from prices, and the creation of an evidence-based reward system linked to changes in health outcomes will lead to significant reductions in expenditures to market products, the area of the largest waste in the current system.

It is important that the total obligations to finance the reward payment are not directly tied to utilization, but rather measures of a country’s ability to contribute to global R&D costs, so that countries do not have incentives to limit access to products in order to control budget outlays on innovation rewards.

Prize mechanisms can be introduced in areas where the markets are functioning the poorest, such as for diseases that primarily affect poor people living in poor countries. But the largest benefit will come from the adoption of prize mechanisms in higher-income markets, such as the United States, both because improvements in the efficiency of R&D incentives in high-income countries are important for the development of medicines used everywhere, and also because pricing norms in high-income countries are forcefully exported to developing countries, creating enormous hardships.

Whilst additional detailed modeling will be required to improve reward structures and evaluation criteria, these efforts are feasible and not materially different from efforts by governments or insurance companies to determine acceptable reimbursements for insured products.

A significant shift to a new system of incentives that relies upon prizes rather than prices will also require a shift to a new global trade framework that focuses less on intellectual property rights and more on country contributions to mechanisms that support R&D, including but not limited to prize incentive mechanisms.

The major challenge to switching financing systems for medical innovation on a global scale depends on whether there is sufficient political leadership."

So we should

Offer prizes to stimulate effective R&D to produce drugs to tackle diseases not adequately targeted by current IP and market forces (This I agree with)

Implement them in parallel with a balanced IP system and government and other funding of basic research (Also agree)

Award prizes based on the success of the R&D in producing effective drugs (Agree)

Don't grant monopolies, where income depends on (hugely expensive and wasteful) marketing, high marginal costs and volumes sold. (Very sensible)

Decouple rewards from the maximising of profits from monopolies to allow a focus on efficient incentives to do effective R&D (This sounds good in theory. The crunch comes in the implementation and identifying measures of effective incentives and outputs - the problem with complex systems is that we often focus on the parameters that are easy to measure rather than those that provide the real measures of success, since the latter are so difficult to pin down. Though I agree wholeheartedly that the vast (from a global health system perspective) waste of money on marketing could potentially be short circuited, it's not clear that other inefficiencies will not be introduced in the inevitable efforts to game the system, whatever it might eventually turn out to be).

Recognise the level of the reward can't be tied to the overall global volume of sales of the drugs produced, otherwise rich countries have an incentive to restrict access to the drug, to reduce the size of the prizes they would have to pay to successful researchers. (Makes a lot of sense but I'm not sure how the level of the prize is actually to be judged?)

Introduce prizes urgently in areas of greatest health need, since the current market system is completely failing to produce (and make accessible) drugs to treat diseases which are widespread amongst poor people in poor countries. (Agreed)

Decouple price from reward to reduce incentives for companies (which would no longer be monopolies) to impose high prices on poorer countries (Agreed)

Look to the insurance industry as a successful parallel model to work from, though the precise details of the proposed prize based system need to be worked out.

Push for a big change to the current global trade infrastructure moving away from the obsession with IP monopolies towards a system which focuses on producing successful R&D outcomes. (Whilst I agree there is an unhealthy fixation on IP monopolies in the prevailing set up, it's still not clear to me what the finer details of the alternative system might be, albeit that prizes for effective pharmaceutical and medical research might be a part of it)

Understand that with such fundamental structural changes in the offing it would require paradigm shifts in global politics and strong political leadership to have any chance of getting off the ground. (This is a major barrier to anything getting done in this area)

It seems that the apparent legal dispute between Ford and the Black Mustang Club whereby the latter was prohibited from publishing a calendar with pictures of members cars was a misunderstanding. Cory has the story.

There's a couple of interesting lessons for Ford and CafePress to take away from this. For Ford (and companies like it), the lesson is surely to tighten the reins on your legal department. When they send stern letters to online service providers that threaten legal action, the natural outcome is that OSPs are going to get gun-shy -- and they'll tell your fans that they can't do anything and blame it all on you. The usual overkill approach from corporate counsel will come back and bite you on the ass.

For CafePress, the lesson is to take your customers' side when the law is with them. Even if Ford did tell CafePress to kill the BMC calendar, they'd have been wrong. The BMC calendar is legal -- even without Ford's blessing -- and when you protect yourself from legal liability by shutting it down, you incur PR liability by seeming like a bunch of candy-asses who can be bullied into submission by a memo from some white-shoe legal goon from a Fortune 100. Word gets around.

I don't know that we'll ever be able to find out whether CafePress told BMC that Ford was down on their specific calendar, but at the end of the day, it doesn't really matter. Ford's earlier letters on the subject clearly scared the hell out of CafePress, and CafePress's lawyers clearly need a refresher course in trademark and liability.

There's one very good piece of news to come out of this, though: Ford's program to let its fans do whatever they want with high-quality shots of the cars is a damned forward-looking and decent bit of strategy.

A White House spokesman is bleating about having had 6 months to get it done and not having done it yet and by implication being soft on the terrorists; and the Democrats are running scared in an election year of being accused of supporting terrorists... it's a mad world.

Wednesday, January 23, 2008

"A cyberattack has caused a power blackout in multiple cities outside the United States, the CIA has warned.

The SANS Institute, a computer-security training body, reported the CIA's disclosure on Friday. CIA senior analyst Tom Donahue told a SANS Institute conference on Wednesday in New Orleans that the CIA had evidence of successful cyberattacks against critical national infrastructures outside the United States."

It's all round the bazaars today that the roll out of the ID card system for UK citizens will be delayed.

"Plans for a large scale rollout of ID cards to British nationals appear to have been delayed for two years - beyond the next general election.

The government had planned to start issuing "significant volumes" of ID cards alongside passports from 2010.

But leaked Home Office documents suggest that it has now been put back to 2012. The Conservatives say the plan is "in the intensive care ward".

The government said it always planned to introduce the cards "incrementally".

While foreign nationals are due to start getting ID cards this year, the timetable for UK citizens over 16 has already slipped and the first ones are not expected to start being issued until next year...

Home Office documents, drawn up in December and leaked to the Conservatives this week, set out an illustrated timeline for introducing biometric ID cards.

It includes the "Borders Phase I" introduction of ID cards for foreign nationals, which will begin later this year.

'Classic fiasco'

Then it indicates that people in positions of trust - like security guards - will be issued with cards in 2009.

But the "Borders Phase II" wider roll-out to all UK citizens will not begin until 2012, the document says. "

Tuesday, January 22, 2008

From the Examiner: the Irish government "is to implement controversial European rules for retaining electronic data, including all email and internet traffic, but said it will not rush legislation through this month."

TJ McIntyre of Digital Rights Ireland also has an article in the Examiner today on the same subject, replicated on his blog.

"How would you feel if someone followed you every day, writing down your movements, making a note of everyone you talked to, jotting down the address of every letter you post, and then storing that information for three years? What would you think if that system of surveillance was extended to every single person in the country? While this might sound like the stuff of science fiction, since 2002 the Government has required telephone companies to track the movements of all their users, to log details of every telephone call made and every text message sent and to store that information for three years. The Department of Justice now proposes to extend this further, to require ISPs to monitor everyone’s internet use, including details of every email or instant message we send, and every time we log on or off, and to store that information for up to two years. What’s more, it intends to do this by the stroke of a ministerial pen, with no debate before the Dáil or the Seanad.

The rather dull name for this surveillance is “data retention”. But it might be more informative to talk of “digital footprints”. As technology comes to be more and more part of our everyday lives, we leave a trail of digital footprints recording almost everything we do. Activities which once would have been private (posting a letter) may now leave a record (sending an email). Data retention laws – by storing these digital footprints – mean that the rights to privacy and freedom of expression we take for granted in the offline world might be lost in the digital age...

Laws requiring monitoring of the entire population are astonishing in a democracy. Yet so far there has been very little public debate. One reason might be that this surveillance happens invisibly in the background. But compared to traditional surveillance it is potentially far more intrusive, and carries much greater risks of abuse. In the United Kingdom we have seen the loss of data on many millions of individuals. Here officials in the Department of Social Welfare have been found to be engaged in the systematic leaking and selling of personal information from government databases. There is no reason to think that this information will be treated any differently."

I'd just like to repeat one of the nice sound bites from this piece to emphasise his point: "Laws requiring monitoring of the entire population are astonishing in a democracy."

The Canadian Privacy Commissioner, Jennifer Stoddart, has expressed concern about the impact of proposed copyright reforms on personal privacy.

"In a public letter to Industry Minister Jim Prentice and Canadian Heritage Minister Josée Verner, Stoddart cautioned against using forthcoming copyright legislation to undermine privacy, noting that "privacy protections for Canadians would be weakened if changes to the Copyright Act authorized the use of technical mechanisms to protect copyrighted material that resulted in the collection, use and disclosure of personal information without consent."

The bill, which could be introduced as early as next week, is expected to use the U.S. Digital Millennium Copyright Act (DMCA) as a model. Since its enactment in 1998, the U.S. law has been roundly criticized on privacy, security and consumer protection grounds."

"The International Federation of the Phonographic Industry (IFPI) has been lobbying Euro-parliamentarians to introduce ISP filtering and blocking across Europe, and pushed to get language supporting these ideas into this report. EFF briefed the committee members on why this would be a terrible idea for privacy, Europe ue process, free expression - and wouldn't work to stop infringement.

So now IFPI has changed tactics. A new amendment, number 82, has popped up, proposing EU-wide law that would extend EU copyright terms "to protect artists who risk seeing their work fall within the public domain in their lifetime, and to consider the competitive disadvantage posed by less generous protection terms in Europe than in the United States".

(The UK's Gowers report already put pay to both of these canards: artists hardly benefit from extensions 95 years after they recorded the song. And there's no "competitive advantage" when extending EU copyright terms means you're paying foreign rightsholders more by charging your own citizens extra.)"

"On January 10, 2008, analysts at the Election Defense Alliance (EDA) reported that based on the official results on the New Hampshire Secretary of state web site, there was a remarkable relationship between Obama and Clinton votes, when you look at votes tabulated by op-scan v. votes tabulated by hand in a head-to-head contest between the two candidates:

While the actual difference between Obama and Clinton hand count and optical scan margins are not a mirror image of each other to four decimal places as we had initially believed, the undeniable fact is that Obama appears to have carried the hand-counted tally statewide, while Clinton carried the optical scan statewide tally, by almost exactly opposite margins remains a remarkable result.

It would appear that there is at least circumstantial evidence that would point to the need for further investigation as to whether Clinton's and Obama's votes have been swapped by the voting machines. I wonder what stage Dennis Kucinich's formal request for a recount is currently at?

"LHS has proven to be less than agreeable to concerns about the voting systems they distribute across New England. Recently, their Director of Sales and Marketing, Ken Hajjar left a surprising comment in reply to a BRAD BLOG story about Diebold. Hajjar's impolitic comment began "Dear Brad, you are totally full of shit." He went on to charge, "You have no idea how elections are conducted and how many safeguards are in place, including human oversight," before referring to Election Integrity advocates as "paranoid" and "deluded".

Unfortunately, the comments were not out of character from previous interviews I'd done with him...

A few minutes later, when asked who would be on site, to either repair or replace the machines if there were problems during elections, Hajjar said, "Either a representative of the town or a representative of the vendor." He then explained, in some detail, about how they would open machines, in apparent violation of state law, to change memory cards during the elections.

Other LHS staff members we spoke with, including Mike Carlson and Tom Burge, provided similar comments. They said they would open machines up during an election and swap memory cards as needed. This is illegal under Connecticut law and Deputy Secretary Mara told us she has since informed LHS that such actions were in violation of Connecticut election laws.

In 2006, as Hajjar argued in favor of their policy to change cards during elections, I asked him about about the laws which govern chain of custody issues. His response: "I mean, I don't pay attention to every little law. It's just, it's up to the Registrars. All we are is a support organization on Election Day".

He said he had three memory cards in the trunk of his car and, in the event they had to be used, the chain of custody issues wouldn't matter since, "once you run the [pre-election] test deck through, you're golden"

"We would have a whole bunch of machines in the trunk in the car and we hope the phone doesn't ring, but if it does somebody tells us where to go, we replace the machine and then we go on our merry way," he declared...

Ken Hajjar's bluntness finally caught up with him this year. Following his less-than-appropriate comments at The BRAD BLOG, he has informed by Connecticut officials that he is no longer welcome to work in the state."

Update: The statisticians have got to work on the potential e-vote conspiracy/cock-up here and are offering several plausible alternative explanations as to why the relative hand and computer counts came out the way they did.

"An analysis by The Associated Press' Election Research and Quality Control service found that Clinton led Obama by about 6 percentage points in machine-counted towns, where she earned 53 percent of the vote and Obama earned 47 percent. Obama led Clinton by about 8 percentage points in hand-counted towns, where he earned 54 percent of the vote and Clinton earned 46 percent.

Joe Lenski, executive vice president of Edison Media Research, one of two firms that conduct election exit polling for The AP and television networks, said those numbers fit the pattern.

"Since Florida 2000 there've been all sorts of theories out there, about Florida in 2000 and of course about Ohio in 2004. And I think certain people who are dissatisfied with the results are going to jump to this conclusion in any race that they're not satisfied with," Lenski said Friday. "And they're looking for one piece of evidence that's going to be convincing."

"If you do a little more statistical digging, you find out that this isn't proving what they think it's proving. It's a pattern that's been around for years," he said...

Lenski said it's all of a piece: Education, income and age -- factors that influence voters' candidate choices, also play into where they choose to live."